With the local economy set for tepid growth over the medium term investors should be increasing exposure to more dynamic economies. Major investment management companies listed on the ASX include Henderson Group PLC (ASX: HGG), Magellan Financial Group Ltd (ASX: MFG) and Platinum Asset Management Limited (ASX: PTM) – these three have leveraged exposure to international markets through performance fees. Other opportunities include:
Hunter Hall International Limited (ASX: HHL) is a Sydney-based investment manager focused on three drivers – value investing, smaller companies and responsible investing.
Including the listed Hunter Hall Global Value Limited (ASX: HHV) there are five funds under management, with only one concentrating on the domestic market.
Revenue is generated from management and performance fees. Although only one fund is 'deep green', all funds are subject to negative screening on environmental and human rights criteria. A recently opened fund is only available to institutional and wholesale investors. Benchmarks used to determine performance fees are the MSCI World Total Return Index (in the case of the international funds) and the ASX Small Ordinaries Accumulation Index in the fund with domestic bias.
Hunter Hall has had a rough time of it over the past few years with the market not favouring its dedicated value investing strategy, emerging markets, or smaller company investment. However signs are appearing that indicate a turnaround is underway.
At $2.25 Hunter Hall sells at 16 times 2014 earnings and a mostly franked yield of 6%. With the major part of internal restructuring now almost complete, there are reasons to be positive regarding the outlook for this company.
With 95% of revenues derived offshore Integrated Research Limited (ASX: IRI) stands out as one of the few ASX-listed entities which is really an international company. Servicing fast growing segments such as Unified Communications, Payment Systems and IT Infrastructure Integrated Research, it has established a firm foothold with a number of major global companies utilising its proprietary software.
The recent release of Integrated Research's Prognosis 10 is understood to have been well received, firming up confidence in the future of this company. Integrated Research carries no debt, earns a 34% net return on equity and is selling on a price earnings ratio of 15 – with a yield of 4.3% partly franked.
R&D expenses (about 20% of revenues) are fully expensed every year. This company has strong appeal.
Foolish takeaway
Wherever you're investing you still need to buy genuine growth opportunities and well managed companies to succeed. Integrated Research remains undervalued on a medium-term outlook and is re-enforcing its reputation in performance monitoring software. Hunter Hall International effectively provides exposure to a value selected range of opportunities. Both will derive extra benefit from any further weakening of the A$.
